The economics and politics of instability, empire, and energy, with a focus on Latin America and the Caribbean, plus other random blather and my wonderful wonderful wife. And I’d like a cigar right now.

May 27, 2017

Sometimes the simplest things are the hardest: explaining the $2 trillion Trump budget error to Uruguayans

Some of you may have heard of the ridiculous error in the Trump budget.

The error, in fact, is so ridiculous that you may have some trouble following the explanations. Matt Yglesias and Larry Summers, for example, managed to confuse me about something super simple. So how was I going to explain this to a bunch of incredulous Uruguayan economists?

Finally, here is what I told them.

The Treasury Secretary published a bunch of tax cuts that would cost $4 trillion. But he then said: hey, no worries, the cuts will speed economic growth so their actual cost will be only $2 trillion.

The budget director took that estimate and said: we have tax cuts that cost $2 trillion, but hey, no worries, the cuts will speed economic growth so their actual cost be zero.

Uh ... yes, the error is that stupid. Thus, it was weirdly hard to explain.